Anxiety Amidst Plenty: A Nervous-Making New Economy

Before he became Bill Clinton’s Secretary of Labor, Robert Reich wrote an early analysis of the New Economy, The Work of Nations (1991),which gave many Americans their introduction to the globalized labor market, vagabond capital and the gap between rich and poor. It has been hard to improve on. The last decade’s worth of New Economy books are of liturgical predictability; only the homilies differ. In all of them, you’re asked to “imagine a world” where “at the click of a mouse” you can “go to” (i.e., buy stuff from ) Paris or Tokyo or Abidjan. They cover the same themes (the vanishing of distance, the triumph of intellectual over physical capital), promise the same gadgetry (mobile EKG’s, “smart” refrigerators), rehash the same anecdotes (America Online’s debate over closed versus open systems, the outsourcing of back-office work to India and Ireland) and lay out the same statistics (2.8 million Web sites, 1,500 television channels, executive compensation at 538 times that of the average worker). What’s particularly depressing is that both left and right, yea- and naysayers–from John Heileman to Dinesh D’Souza to Ken Auletta–agree that the big payoff of the Internet Age will be an explosion of choice and variety. You certainly can’t tell it from their books: If it’s Tuesday, this must be George Gilder.

Mr. Reich, now at Brandeis University, still thinks choice a topic worth harping on. In The Future of Success , he argues that it has created a windfall for consumers–even an “Age of the Terrific Deal.” The 4-foot-10 Mr. Reich now orders bespoke suits on the Internet. In a few minutes online, you can find airline tickets for a fraction of what you paid a decade ago. The hitch is that we don’t live our whole lives as consumers. “The easier it is for us as buyers to switch to something better,” he writes, “the harder we as sellers have to scramble in order to keep every customer, hold every client, seize every opportunity, get every contract.” In other words, hunt hard for those bargains, because your boss is looking just as hard for ways to replace you with something cheaper. The result is an anxiety amidst plenty that has reshaped, in dubious ways, both the workplace and society at large.

Americans now work harder than any people on earth, besting even the work-drunk Japanese. The poor, of course, need to scramble to keep up. But the rich are logging more hours than anybody, and there are two interesting reasons why. First, at a time of increasing income stratification, they’re taking in money hand over fist, making the opportunity cost of slacking off intolerably high. Second, the proliferation of choice confuses the public and creates a desperate need for quickwitted people to do the choosing. “In the emerging economy,” Mr. Reich writes, “buyers often don’t know what they want, and use the brand-portal as a means of discovering it.” (A more cynical view is that, while other peoples shop to find what they want, Americans shop to find out what they want.)

Increasingly, what the New Economy’s winners bring to the marketplace is raw brainpower, particularly of the creative sort. Data is so universally available that it has become virtually worthless. Wall Street analysts no longer sell research; they sell advice, i.e., intelligence. The rich, in general, work harder because high-paying jobs are more interesting than they used to be. The idea that today’s nouveaux riches are “particularly adept at using new information technologies,” Mr. Reich notes, is a gross misperception. Telling someone to study computers as a means of getting rich off the new technology is about as sensible as telling a bright boy of 1925 to become an auto mechanic. If Mr. Reich is right, the class implications are profound. Elite universities will likely turn back into the mills of class differentiation they were in the Gilded Age. Nobs will once again spend four years studying poetry and music before going off and employing all those classmates majoring in business and computer science.

Mr. Reich devotes far too much of his book to the question of how to get those plum jobs. The short answer is self-promotion, although Mr. Reich delivers it through a rather complicated metaphor: He suggests that young men and women on the make “brand” themselves. (This strategy is urged, albeit in more business-guru-like fashion, by Tom Peters in his recent The Brand You 50 , which Mr. Reich can be forgiven for ignoring.) “Even if you’re called a full-time employee, you’re becoming less of an employee of an organization than you are a seller of your services to particular customers and clients, under the organization’s brand name,” Mr. Reich writes. “The incentives are on the side of investing in one’s personal brand rather than devoting time and energy to the organization.” In such a world, loyalty changes from an obsolescent asset to an outright liability. Stay in a job for five years or more and the job market will look at you as a dud, a loser, dead weight. One corporate recruiter tells Mr. Reich that he no longer interviews straight-A students from the Ivy League schools; he assumes they’re conformist hoop-jumpers.

Big inequalities in the workplace are multiplied by cultural changes, the greatest of which is feminism. Since rich and poor tend to marry their own kind, more women in the workplace means family incomes diverge even faster than single ones. But marriage itself is faltering, in Mr. Reich’s view because men, minus their monopoly on steady earnings, “are nowhere near as good a deal for women as they used to be.” (Surely Mr. Reich is not implying that your average working woman is some kind of marital prize?) Even where marriage is contracted, it’s a weakened institution. Couples delay childbirth (in Massachusetts, more babies are born to women over 30 than under) or skip it altogether. More and more family functions get “outsourced,” as they would in a corporation cutting fixed costs. Already, households spend less on groceries than on meals or restaurants. And the subcontracting of caregiving that began with nursing homes has spread to day care. Not all “outsourced” children are alike, as Mr. Reich points out. Some receive the equivalent of private tutoring, while others are yoked together with ropes and herded through cities in conditions of squalor and boredom that would provoke the pity of a Bosnian P.O.W. In this, they are merely sharing in an adult reality of the Information Age: There’s a domino effect to workplace inequality.

Mr. Reich is at his strongest when describing a new mechanism of class stratification that has become almost feudal in its reach. Linked to information technology, money does vastly more than it used to, sorting people into virtual castes (Mr. Reich doesn’t use the word) entitled to different levels of service, attention and even citizenship. Now that computers can gauge with actuarial precision a customer’s prospective value to a business, there are areas of the economy where life has improved for the richest and taken on a Third World flavor for everyone else. Air travel is one instance, but so are practically all businesses accessed by telephone, which will soon “figure out how to separate their better customers, who want and are willing to pay for more personal attention, from lower-paying customers served by automated and Internet devices.” Already at Merrill Lynch, any caller with an account under $100,000 gets routed to a nuisance line. (There’s no such thing as free common courtesy.) Meanwhile, now that banks can figure out to the penny just how much credit a prospective home-buyer can carry, neighborhoods are more than ever sorted by minute gradations of income–and with them schools, and with them retail services.

Already society’s institutions are hardening to codify such inequalities. Taxes are shifted away from income and capital gains and onto gas, cigarettes, alcohol and lotteries, which disproportionately hit the poor and other sitting ducks. If you’re mobile enough, you can avoid many of them. The very wealthiest are granted subsidies, whether in the form of tax waivers or bond issues for new stadiums.

Robert Reich is an acute diagnostician of the New Economy. And so it’s strange that he continues to use the old one as the hammer that makes everything look like a nail. He says he knows that the Industrial Age is gone, that New Deal remedies won’t mitigate today’s dislocations. But his specific policy suggestions–replace unemployment insurance with “earnings insurance” so that people who get fired can have a guaranteed income; give every 18-year-old a $60K “nest egg”; encourage (or even “require”) flex time; subsidize day care and require low-income housing to be built in upscale communities–belie him. He’s much less interested in discarding the old industrial model than in reconstructing it, piece by piece, in the heart of the information economy.

It’s not just that such solutions are authoritarian; it’s also that they heap kindling on the very fires Mr. Reich wants to damp. It’s no paradox that some of the most enthusiastic proponents of New Deal-style social programs are to be found among those New Economy companies that use the programs to hamstring their more traditional competitors. What look like “liberal” measures designed to help working people actually lend competitive advantages to the giants of the New Economy. Take the tax moratorium on Internet sales, which amounts to a subsidy that your corner bookseller pays to Amazon.com. Or the Family and Medical Leave Act, which Mr. Reich admits is not too useful to his family, and which works well only for two-big-earner families working for heavily capitalized, highly flexible white-collar firms. He recognizes, too, that his own investments and pension funds lead to union-busting. As Labor Secretary, Mr. Reich had a reputation for being disproportionately tough on Old Economy companies–mills where workers fell into vats of molten steel, that kind of thing. His liberal credentials and his hand-wringing notwithstanding, he has found it hard to avoid taking the side of the real powerhouses of the New Economy, in a way that ought to make us question what it actually means nowadays to be on the “left.”

What’s best about this book is not particularly new, while what’s new is not particularly good. Mr. Reich remains an admirably independent thinker (as evidenced most recently by his rage-inducing abandonment of Al Gore at the height of the Florida re-count crisis). But there’s something bromidic about this book, more typical of Mr. Reich’s epigones than of Mr. Reich himself, almost as if he wanted to pick up where he was interrupted when he left the academy for politics a decade ago. As Henry Kissinger warned, everyone who goes to Washington spends down his intellectual capital, and Robert Reich is only partially recovered from having done just that.

Christopher Caldwell is senior writer at The Weekly Standard and a columnist for the New York Press.